Online brokerage companies that grew by leaps and bounds during the pandemic are now in the slow lane. This is because the market bull run is slowing down, and customers who had time to play around with stocks while they worked from home have gone back to work.
Some of the biggest discount stockbrokers that are based on technology have seen a noticeable drop in the number of regular users over the past few years.
Data show that Zerodha lost about 200,000 users in the last nine months. In an interview with ET on April 11, the company’s founder and CEO, Nithin Kamath, said that he thought the stock brokerage firm would have a big drop in the coming fiscal year. “It’s hard to know what’s going to happen. But if the market keeps going like this, sales will drop by 30–40%. “And new accounts are already down 50–60% from all-time highs,” he had said.
“Many of those users stopped using us because we didn’t have long-term investment options like mutual funds on the app. It might have been too complicated for them,” said Kumar. “But now we’ve added non-professional investment options to the professional ones, which should get a lot of the non-professional investors to come back.”
Gainers in the Melee
“The market has been stuck in a narrow band for the last six months or so. When this happens, things always slow down. “On a net basis, there are new customers coming in,” said the founder of a wealth-tech company on the condition of anonymity.
But there are also people who win. Angeline and Groww are two of these players who stand out.
Groww got help from companies like Sequoia Capital and Tiger Global when it got into the trading market in 2020. Since then, it has grown quickly. The Bengaluru-based startup has gained about 5.3 million active users in less than three years and was last valued at $3 billion.
Harsh Jain, cofounder of Groww, said, “Our users are well-informed about the volatility and risks of markets. This has helped spread positive word of mouth, which keeps bringing in new users who want to invest in stocks for the long term.”
Angelone has also grown since it released its new “super app” in November of last year. As of March 2023, it had 4.2 million active buyers. In June of last year, there were about 4 million.
ET talked to people who work in the industry and they said that the biggest effect of the slowdown has been on players who got a lot of attention during the pandemic.
During the pandemic, buyers who wanted to get into the stock market used Zerodha because it was already the biggest. Others also grew, like Upstox and 5Paisa.
Since the market has slowed down and interest rates on fixed savings have gone up, traders in that group are less excited.
Kumar from Upstox said that the company had spent hundreds of crores advertising on IPL, which gave it “massive” name recognition. “But at the same time, it brought us customers whose needs might not have been met elsewhere,” he said.
But tech brokers are still an important part of the brokering industry. More than 70% of the work that trading firms do to add new users is still done by tech brokers.
“There is definitely a move toward discount brokers, and today’s traders want a better user experience, so it’s no surprise that new-age broking platforms are still growing,” said Subramanya SV, cofounder of wealth tech platform Fisdom.
AngelOne’s chief business officer, Prateek Mehta, said that the market was still getting a lot of new users, which was a good sign. “About 40 percent of our new users are younger than 25. They are coming in large numbers from tier II and tier III locations, which means there is a huge chance to grow, and tech-backed players have an edge there,” he said.
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